Why performance appraisals are dead – turning to tech

It’s hard to know what is happening in the HR world. One minute we are being told that appraisals are dead, with the CIPD reporting in 2015 that 2/3 of businesses want to restructure the process and 1 in 20 businesses are planning to scrap appraisals altogether.

Skip forward 12 months, and the CIPD are reporting on a CEB study that found employers who scrapped appraisals have seen ‘significant’ drops in productivity – so where does HR go next?

In my experience, many SME’s have never used appraisals anyway, but many say they need to. Most of the Welsh employers I speak to tell me that they need to put some form of formal structure in place for staff appraisals and it’s high on their list of priorities. The new research and the UK’s productivity gap brings appraisals back to the table – but for many, they were ON the table anyway.

That said, the old, outdated model is definitely not the way to implement performance appraisals. With annual reviews linked to pay and the opinion of just one manager, both staff and managers find the process stressful.

In older structures, standards would vary widely from one appraiser to another. And while the review should relate to a whole year, in practice it only related to the last few weeks and was purely based on the reviewer’s current opinion on the reviewee’s performance – and we wonder why it didn’t work well!

I’m not surprised some larger businesses scrapped the process – but the drop in productivity shows that scrapping them is not working either. So rather than throw the baby out with the bathwater, the UK needs to tackle its productivity issues and start to engage their people in a constructive way. Those who have improved the performance review process are already seeing results.

Software giants Adobe, for example, have replaced the ‘annual appraisal’ with a system of ongoing feedback. An employee or a manager can request a “check-in” meeting every three months.

Before the meeting, the manager requests feedback from the employee, and also obtains feedback from their peers across different levels, including co-workers and other managers. The results give the manager a wider perspective on staff performance.

The manager can then tailor their advice accordingly, and the approach is collaborative, continuous and engages both sides. Group performance is also evaluated, leading to a more rational determination of group compensation.

The results speak for themselves: Since changing the process, Adobe has experienced a 30 percent reduction in voluntary staff turnover – which is rare in a highly competitive talent environment.

Our Bridgend-based team recently celebrated the launch of a new version of our Activ Appraisals software, which helps supports managers to conduct more effective performance reviews.

Managers can still elect to do traditional annual appraisals if they prefer. However, there are conscious changes which improve consistency within the process and more importantly, engage employees better.

For dynamic employers keen to move towards a more frequent ‘Adobe style’ process, the system works brilliantly. The same steps could be followed without software, though the automation makes it less time consuming.

Firstly, HR are able to set up a competency framework, so that line managers have a consistent standard throughout the business against which to assess employees.

Managers can choose the frequency of the review meetings, but employees are involved in the process, rather than just called to attend a review meeting.

Employee feedback is requested automatically ahead of the meeting, which the manager will have chance to review in advance.  The system also allows managers to implement peer reviews, commonly called 360 degree reviews, though not everyone uses this feature.

The appraisals software then supports line managers to agree individual SMART performance objectives with the employee. SMART objectives are:

  • (S)  Specific
  • (M) Measurable
  • (A) Achievable
  • (R) Realistic and
  • (T) Time framed

Post meeting, managers can review or modify objectives at any time and employees are automatically notified. The system also allows employees to add their own SMART objectives and request training at any time, automatically notifying the manager.

The ability to tailor appraisals software to suit business processes is often praised by customers like Kleinwort Benson, although success is largely down to the improvements that the software makes to the process itself.

While software can certainly help, the secret to helping line managers ‘get performance reviews right’ is to consider employees as individuals, encouraging dialogue and acknowledging and rewarding individuals whilst maintaining consistency in approach.

Focusing on an individual and taking their input recognises their worth and promotes a flexible approach and individual coaching – which usually produces better results. The performance appraisal simply takes this approach and formalises it into a useful structure so as well as delivering feedback, you can monitor and assess how successful it is.

Far from being dead, regular performance appraisals can be empowering and can leave an employee feeling more motivated and a vital part of the team.  In a climate where competition for talent is hotting up, and the productivity gap is a constant challenge, I’d argue that not embracing some form of performance review leaves SME’s missing a trick.

For the many welsh SMEs that are struggling without them, I’m told implementing performance reviews is very much on the table.

Adrian Lewis is the commercial director for welsh software developers Codel Software and has been advising businesses on how software can best manage HR challenges for more than 10 years. 

Image credit: Jason Taellious